Trade setup for Oct 7: Can NIFTY50 defend the gains above 22,700 on Wednesday?

GIFT NIFTY futures indicate a weak start for Indian markets on Wednesday amid mixed global market cues. Crude oil prices staged a small bounce back on Wednesday morning, and the Asian markets went into profit-booking mode, plunging 1%.

Brent crude oil prices surged back above the $100 per barrel mark on Wednesday morning, after reports indicated that Iran attacked maritime shipments in the Strait of Hormuz. However, crude oil prices continue to trade in the red for the week, plunging over 3%.

In Asia, the benchmark indices of Japan, Korea and Hong Kong plunged as much as 1% on Wednesday morning, amid profit booking in the tech stocks. Concerns prevailed among investors over the sustainability of semiconductor earnings and the AI boom amid elevated global bond yields.

The US stock markets continued their record run on Tuesday as the NASDAQ 100 and the S&P 500 made fresh peaks, while the Dow Jones surged 0.49%. Tech stocks continued to lead the rally in the US markets as NVIDIA, Intel Corp, and Microsoft surged as much as 3% on Tuesday.

NIFTY50 chart check

NIFTY50 staged a smart bounce back above 22,700 levels, rising nearly 1% on Tuesday. The index closed above pivotal resistance levels, indicating a strong reversal from the bearish momentum. In addition, the index also managed to close above the 20 and 50 EMA levels, indicating improving sentiment in the short term.

On the daily charts, the index made a strong bullish candle, suggesting buying strength from lower levels and confirming a reversal from the double-bottom candlestick pattern made in the previous week. Going forward, 23,100 remains the immediate resistance, and 22,250 remains pivotal support in the long run.

NIFTY50 open interest summary

The initial buildup for the coming weekly expiry on September 13 indicates indecision on the direction. The 22,700 calls and puts held the highest open interest for the coming weekly expiry. However, 22,300 to 22,700 puts witnessed strong open interest addition, in comparison to the calls side, indicating strong support emerging at lower levels.

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